(Il Sole 24 Ore Radiocor) - Milano, 11 giu - German gross domestic product is expected to recover more slowly than expected in 2027 as the war in Iran weighs on economic momentum, according to the Kiel Institute's summer economic forecasts.

German GDP is now seen rising 1.0% in 2027, revised down from a previous 1.4%, and compared with 0.8% growth still expected for 2026. Growth is expected to be driven by higher public consumption and investment spending, while private investment activity remains weak, and employment prospects deteriorate.

'The consequences of the Iran war are dampening economic output,' said Moritz Schularick, president of the Kiel Institute. 'The rise in commodity prices is proving to be more persistent, which will continue to constrain economic activity into next year.' Structural problems in the German economy also persist, according to the think tank, which notes that while exports have recently stabilized and are likely to gradually return to a moderate growth path, there is still no sign of dynamic recovery following the declines of previous years.

'The declining competitiveness of the German economy will lead to further losses in global market share,' said Stefan Kooths, head of forecasting at the Kiel. 'Compared to past upswings, the expected growth rates are modest. Without far-reaching reforms to strengthen the country as a business location, the German economy risks drifting into a phase of weakening growth forces and increasing distributional conflicts.' Kiel expects inflation to reach 2.8% this year and remain elevated at 2.3% next year. Export growth will be modest, at 1.8% over the year.

Private consumption is expected to rise 0.3% this year and 0.4% in 2027.

Growth in construction investment is also dampened by rising commodity prices. For 2026, despite the infrastructure special fund, only a modest increase of 0.3% is expected, followed by a projected rise of 1.9% in 2027.

Kiel expects an average unemployment rate of 6.3% this year, with a slight decline to 6.2% next year. At the same time, public budget deficits are widening significantly, with the expansionary fiscal policy stance projected to increase the budget deficit from 2.8% of GDP in 2025 to 3.8% this year, and 4.1% in 2027. Gross debt is seen rising to 65.3% of GDP.

this year and 66.9% in 2027 from 63.5% in 2025.

(RADIOCOR) 11-06-26 11:30:30 (0264) 5 NNNN